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Bigger FDI realized capital propels Vietnam's economic recovery from pandemic



HANOI, April 30 (Xinhua) -- Along with smaller registered capital of foreign direct investment (FDI) projects in the first four months of this year, Vietnam has continued to see bigger realized capital that helps boost its economic recovery from the COVID-19 pandemic.

Vietnam licensed 454 new FDI projects with a total registered capital of 3.7 billion U.S. dollars between January and April, recording an increase of 0.7 percent in the project number while a decline of 56.3 percent in the registered capital compared to the same period last year, said the General Statistics Office.

However, in the four-month period, 323 operational FDI projects increased their capital by roughly 5.3 billion U.S. dollars, posting a year-on-year surge of 92.5 percent. Meanwhile, realized capital of FDI projects surpassed 5.9 billion U.S. dollars, up 7.6 percent year on year.

In the first quarter of this year, realized capital of FDI projects stood at more than 4.4 billion U.S. dollars, witnessing a year-on-year rise of 7.8 percent, the highest growth in the last five years, said the office.

Among the realized capital of over 4.4 billion U.S. dollars, more than 3.4 billion U.S. dollars, or 77.8 percent of the total, came from manufacturing and processing sectors; 8.6 percent from electricity, gas, hot water and air conditioning production and distribution; and 7.9 percent from real estate trading.

Realized capital of FDI projects in Vietnam also increased remarkably in the 2012-2019 period, by an average nearly 10.4 percent a year. More and more foreign capital are being poured into manufacturing, processing, science and technology sectors.

"Bigger FDI realized capital reflects foreign investors' hope on Vietnam's economic recovery. The bigger amount of money means expanded production of economic sectors, creating favorable conditions for economic recovery amid the global pandemic and economic growth in the coming months," Do Thi Thu, a lecturer at the Banking Academy of Vietnam, told Xinhua on Saturday.

The convergence of FDI, both registered capital and realized capital in manufacturing and processing sectors and some other industrial sectors is an important factor for accelerating economic restructure to the modernity and sustainability, contributing to enhancing the capacity of launching more value-added products and services in 2022 and the following years, she said.

Nguyen Mai, head of Vietnam Association of Foreign Invested Enterprises, has predicted FDI realized capital would rise some 10 percent this year, while registered capital would increase by 10-15 percent. The country attracted nearly 31.2 billion U.S. dollars in total foreign investment in 2021, up 9.2 percent from 2020, with top foreign investors being Singapore, South Korea, Japan and China.

Many free trade agreements, especially the Regional Comprehensive Economic Partnership (RCEP), have already taken effect, bringing trade advantages to Vietnam, and subsequently stimulating investment, including FDI in the country, he told local reporters.

Contributing factors to continuous flows of FDI into the Southeast Asian country in general and bigger FDI realized capital in particular include stable, favorable investment and business climate, effective investment promotion campaigns at home and abroad, low labor cost, basic containment of COVID-19, timely resumption of international tourism from March 15, and more simplified entry-exit procedures for foreigners, according to officials and experts.

In late April, the Vietnamese government decided to allow foreigners to enter Vietnam using electronic visas through Van Don International Airport in the northern province of Quang Ninh, expanding the list of such airports in the country to total nine, which include Noi Bai in capital Hanoi, Tan Son Nhat in the southern Ho Chi Minh City, Cam Ranh in the central province of Khanh Hoa, and Phu Quoc in the southern province of Kien Giang.

Le Xuan Dong, head of market research and consulting services at FiinGroup, a leading financial data and analytics provider in Vietnam, said the country has recently adopted more measures to support enterprises, improve business environment and attract FDI, including a decision on promoting digital transformation and encouraging investments in high-tech projects and startups.

At present, the Ministry of Planning and Investment is working on a specific set of criteria to attract more FDI, with focus on investment unit cost, labor, technology, technology transfer, connectivity and spillover effect, environment, and national defense and security.

However, the existing measures are not still enough, Nguyen Mai said, who believes that Vietnam should center on speeding up administrative reform, and improving infrastructure.

The country should establish more specialized research and development centers in order to make full use of foreign investment and foster high-quality human resources training, he added.

"Vietnam will face challenges in transitioning to higher-skilled jobs without continuing reforms in education, skills development, and a transformation of the labor market, which is characterized by slow growth of high-skilled occupations, high informality, and an aging workforce. Improving the quality of higher education will be an important step," the World Bank in Vietnam has recently said.

Meanwhile, many experts have made a proposal concerning creating a specific legal corridor for more foreign-invested enterprises to become public companies and then list their shares on the local stock market.

According to the Foreign Investment Agency under the Ministry of Planning and Investment, Vietnam currently has 34,815 valid FDI projects with a total registered capital of more than 422.8 billion U.S. dollars. But only eight foreign firms currently list shares on the Vietnamese stock market, accounting for 0.3 percent of market capitalization.

"In the coming years, some Vietnamese sectors will attract stronger FDI, such as logistics, technology, financial services, utility, healthcare and education services, manufacturing and industrial real estate," Le Xuan Dong told Xinhua on Saturday. Foreign investment in environmentally friendly sectors are also encouraged by both the Vietnamese government and provincial authorities, he added.

Vietnam's economy is expected to rebound to 6.5 percent this year and further expand to 6.7 percent next year, from 2.6 percent last year, thanks to high vaccination rates, trade expansion, and continued accommodative monetary and fiscal policies, the Asian Development Bank said in April. ■